Generic Drug Law Saves Public Little, Panel Told

By David A. MaranissBy David A. MaranissMarch 7, 1979

Maryland's generic drug law has saved consumers very little money in the year since its enactment because most state pharmacists have been unwilling to stock and substitute generic equivalents for more expensive brand-name drugs, a House panel was told today.

An unusual alliance of pharmacists, U.S. drug officials and consumer groups argued at an Environmental Matters Committee hearing that the state's generic drug law -- once hailed as a cost-saving boon for consumers -- was not working as intended because pharmacists had no economic incentive to sell the generic equivalent drugs.

The current law requires pharmacists to pass on to consumers the entire savings between the cost of the brand-name drug and its generic equivalent. For example, if a brandname drug is purchased by a pharmacist for $6 and sold for $6.25, then its generic equivalent, if purchased for $2, must be sold at $2.25.

Rather than partake in what they claim is an unprofitable venture, most state pharmacists say they simply refuse to stock the generic drugs.

"The law looks good on paper, it looks like it's great to pass on ail the savings to the consumer, said Del. Luiz Simmons (R.-Montgomery). "But it's clear that it's not working. If the goal is to get pharmacists to substitute the generic equivalent whenever possible, then there must be more incentive for them to do it. The way it is now, the consumer isn't benefitting because the generic drug isn't available."

Simmons is the sponsor of the bill the committee considered today. His bill would allow pharmacists to leep 25 percent of the difference between the cost of the brand-name drug and its generic equivalent.

At today's hearing, Simmons claimed that his bill would save consumers an estimated $5 million annually simply by making the drug more available. However, the pharmacists and federal officials who appeared at the hearing argued that this measure did not go far enough.

These witnesses said the bill should be amended to require merely that generic drugs be sold at a lesser price than their brand-name equivalents.

"I would accept that amendment if necessary," said Simmons.

Dayle Berke, an attorney for the Federal Trade Commission, said the FTC recently completed a two-year study of drug selection in seven of the 40 states that have generic drug laws. The study found that pharmacists were not making generic equivalents readily available in states such as Maryland that has "pass-on" requirements.

"This appears on its face to be proconsumer, but in practice is contrary to consumers' interests," said Berke. "It means that the harmacist cannot profit by so much as a penny for costs that may be incurred in using professional skills to search for, stock and dispense lower-cost generics."

As a result of this study, Berke said, the FTC drafted a model generic drug law and urged state legislatures to considered it. Simmons' bill is based on the FTC model law with the one exception of the 25 percent savings "pass-on" to consumers, which Berke said would be "difficult, if not impossible" to administer.

Myron Gerber, chairman of the Drug Fair chain stores, said that most pharmacists "believe in generic drugs," but cannot "responsibly" follow the Maryland law because it creates so many price inconsistencies.